Nigeria needs to compile a solid economic-recovery plan with the right foreign-exchange policies to convince the World Bank to approve a $1.5 billion loan to support the West African nation’s budget.
The government has to assure the lender’s shareholders it is doing all it can to prop up Africa’s largest economy amid the devastation brought by the coronavirus pandemic, according to the World Bank country director in Nigeria, Shubham Chaudhuri. The nation had expected the loan to be released earlier this year to help cover a widening budget shortfall.
President Muhammadu Buhari’s administration has been forced to devalue the naira three times this year as authorities struggle to curb the demand for dollars.
“The way that our board and our shareholders approach this kind of budget support is to say: ‘Has the country that’s requesting the support done all it can to help itself?’” Chaudhuri said in a webinar, when asked about the loan. “There needs to be a little bit more.”
The pushback comes after Nigerian Finance Minister Zainab Ahmed told Bloomberg TV on Nov. 27 that the loan was in the final stages of approval as the government had fulfilled the bank’s conditions. The country is asking for financial help to overcome a crisis that could sink an extra 7 million people into poverty.
Solid exchange-rate management and macroeconomic policies are key for the World Bank to assist the continent’s top oil producer, Chaudhuri said. Two separate loans worth another $1.5 billion earmarked for Nigerian states will be considered by the lender’s board on Dec 14.
President Muhammadu Buhari’s administration has been forced to devalue the naira three times this year as authorities struggle to curb the demand for dollars. Still, the naira remains too expensive and a dollar shortage is starting to hurt local businesses, economists say.
The merger of different exchange rates and allowing the naira to float more freely would speed up the recovery of an economy that slumped into a recession in the third quarter and bolster investor confidence, according to the World Bank.